Living paycheck to paycheck is no joke and no fun. It is filled with dread, worry, and copious amounts of stress and it is a struggle to find balance in order to keep money flowing to the end of month. This is a struggle that I personally know all too well.
I was once drowning in over $11,000 of credit card debt alone and was very much so living paycheck to paycheck hoping that I would not receive an eviction notice on my door. This struggle apparently was not exclusive to just me, even though at the time I thought I was the only one struggling. How do you stop living paycheck to paycheck and start reaping the benefits of having a fully funded emergency fund, money for retirement, and manageable expenses?
It took about a year for me to completely stop living paycheck to paycheck. There are three strategies that I used to regain control over my money to make the ends finally meet.
1. Budget
This is an obvious first step for anyone attempting to gain control over their finances but a super necessary one nonetheless. Budgeting does not have to be rocket science or follow some complicated math formula; you simply just have to do it. Start by writing down your monthly income, followed by your monthly expenses, and then subtract the two. This will give you a clear picture of what your expenses look like, your expected income and if you are in the red or not.
If you’ve never created a budget before, I encourage you to check out The Quick Start Budget which is the FASTEST way to get started budgeting – seriously, you’ll have the budget created in no time!
If you like real-life examples of budgets, head here to read our family of five’s 2016 actual budget – yes, our real budget.
2. Emergency Fund
This by far has saved us from certain financial failures and disasters many times. An emergency fund is essential to healthy financial living – seriously, your financial health depends upon you being able to afford an emergency. It doesn’t matter if you’re trying to pay off debt, plan for a baby, save for retirement, or just take a family vacation – without a savings account to buffer the blow of life you’re going to struggle to afford the basics of life.
So, I can’t encourage you enough to make this a priority in your life – start saving and building up your emergency fund today. Start with a $1,000 and then work your way up to the next level. The goal is to have at least 3 to 6 months of living expenses saved. If you have irregular income you will want to have 6 months saved since your income is less predictable.
3. Half Payments
This is a little trick I started doing after I had a little money saved up. I would take my expected payments and divide them by half (I was being paid bi-weekly) and in my checkbook register I would write out the half payment and subtract the money from my account.
Example: divide a $300 car payment into two $150 payments. Whenever your bi-weekly check is paid to you, immediately take the $150 out of your checkbook register (or whatever expense tracking system you use). This way you always have the money ready to pay when the bills came due and never have to run around searching for ways to bring in more money before the month end. To see this process in more detail, head here to read the full post.
4. Pay off Debt
Okay, so I know the post says that there are just 3 strategies and the three above are in fact the ones I used all those years ago to stop living paycheck-to-paycheck, but I can’t finish this post without mentioning that if you want to further keep the paycheck-to-paycheck cycle happening again, you need to dump the debt.
Yes, that means no credit cards. Yes that means living frugally for awhile so you can pay off as much debt as possible. Yes, that means it won’t be easy but as a family of five that has paid off over $55,000 of consumer debt (in just 2 years!), we are living proof that life is so much easier to live when don’t have to rob Peter to pay Paul.
Start today to put an end to the paycheck to paycheck trend and save yourself financial hardship.
How did you stop living paycheck to paycheck?
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Jesenia @ The Latina Homemaker says
Love this post! I also use the half payments method and it works out great for us.
Jessi says
I love using half payments – makes everything so much easier!
amanda says
agree with this! a budget is a MUST! it is also such a relief if you have an emergency fund. we are currently building ours and i think we might make ours a little larger – just in case…you know, because life happens 🙂
Jessi says
Heck yes Amanda! 🙂
Josh Coffy says
Wow! $11,000 of debt is no joke!
This was an amazing joke. I’m HUGE into budgeting. Being financially literate is one of the #1 things I strive to do.
If you can understand personal finance properly, then it’ll leak into your business and make you generally more positive! Paycheck to paycheck sucks! 🙂
Michele says
Love this post. I have paid off debt several times. My most successful plan was when I learned from a friend how to track my money. I was able to see where my money was being spent and make adjustments to my spending habits. I also created a spreadsheet listing everyone and everything that owed money to and for such as credit cards, insurance, utilities. When I began to see how much my storage payment was going to total up to at years end, I immediately cleaned it out and stored the things that kept in my relatives basement. I actually ended up with an emergency fund without noticing that that is what it amounted to. Each paycheck I would get $20 in quarters and store them in a shoe box. The more I got of debt the more quarters I would get. I also made it a habit to spend paper money only and save the change. Unfortunately I have fallen off the wagon (student loans and dumb decisions) and, i I am finding it harder to work my way out again. I have found that being in debt has keep me financially unprepared to take advantage of good opportunities when they have present themselves I.e.. investments and hwlping others).
Alexandra says
I am extremely grateful to Dave Ramsey and others like him (YOUI) who share info to help us all learn about personal finance. We made lots of stupid decisions for years but finally learned, REALLY learned and have had so much peace of mind as a result.
Not worrying if there is enough money to pay rent, light bill or gas in the car is a truly fabulous feeling.
Once we paid off credit cards, we were stunned how much more money we had as we were no longer shelling out interest every month.
If we can do it, anyone can do it!
Most of want to make enough money so we don’t have to “think” about it. I’m here to say, that day never happens. We all must learn to manage money, track it, be responsible and ONLY then will we get it under control. For us it was like moving from an adolescent mind set to grown up.
Recently my husband was out of work for 7 months. Yes we dipped into savings accounts that were for retirement but we never once woke up in the middle of the night afraid we’d lose the house. THAT was worth all the saving, cooking at home, not driving, and just being responsible.
EVERYONE can do this. Don’t give up.
Jessi says
Oh I love this Alexandra! You are so right that there will never be enough money to stop thinking about money. You ROCK! 🙂
Amy Meredith says
So frustrating to be in debt. Would love someone to take the reigns at times or hold my hand.
Jessi Fearon says
Debt has become a dirty four-letter one in our house and I know that once we agreed to stop using it, the easier it became to climb our way out.
Janice Scarbrough says
Amy – I am divorced and in debt, most of it my own doing. Since we don’t get do-overs as grown-ups, I guess we have to pull ourselves up by our own bootstraps, as they say. I, too, get tired of rowing the boat all alone, though. Sometimes I cry because life gets so overwhelming. I have a decent job, but also have car and house payments, credit card debt, and the usual monthly expenses. Do you understand the half-payment system? I mean, if I deduct half my car payment from my checking account during the first paycheck, then how do I keep up with where that money is for the next two weeks? And if I do that with my house payment, how do I really keep up with it?
Jessi Fearon says
Hi Janice! With the Half-payment system, I recommend starting small and slow. Start with the smallest fixed bill and work your way up. It is not a perfect system and will require you to constantly watch where your money is going until you get the hang of it. One of the ways that I suggest to keep up with where the half-payment goes is to either immediately apply it to the bill (if the bill company allows you to do that) or to transfer it to a “holding account” whether that is another checking account or savings account to ensure that you don’t accidentally spend the money. I hope this helps!
EL says
These are great ways to stop the bad paycheck cycle. If you do 1 at a time you’ll get some results. If you do all 3 things will change even faster. Good luck and keep watching your money.
Emily @DomesticDeadline.com says
Budgeting is so important. It’s a skill I’m trying to teach my teenage girls now! Thanks for sharing at #HomeMattersParty
Jessica says
I just recently started a Dave Ramsey budget and I love it! For years people had said watch where you are spending your money,but never HEY you are spending it wrong. I now realize I have been allocating too much to some areas and not enough to others. Great tips, thank you for sharing. I love that half paymet method. I need to give it a try for sure.